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Riehs v. Rutgers Casualty Insurance Co.

January 5, 2010

DONNA RIEHS AND JOSEPH RIEHS, AS ASSIGNEE OF THE RIGHTS OF SHAR WILLIAMS AND GLEN WILLIAMS, PLAINTIFFS-RESPONDENTS,
v.
RUTGERS CASUALTY INSURANCE COMPANY, DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-6530-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted December 7, 2009

Before Judges Reisner and Yannotti.

Defendant Rutgers Casualty Insurance Company (RCIC) appeals from a September 29, 2008 judgment entered by Judge Paley, finding Rutgers guilty of bad faith refusal to settle a claim and awarding $134,167 in damages and attorneys fees. We affirm.

I.

RCIC, which insured defendants Shar and Glen Williams, refused to offer its $100,000 policy to settle an automobile negligence lawsuit filed by plaintiffs Donna and Joseph Riehs. Despite receiving a steady stream of Rova Farms*fn1 letters from plaintiffs' attorney, as well as multiple letters from defense counsel before and during the auto suit advising of potential weaknesses, RCIC never offered more than $30,000 to settle the case. Furthermore, RCIC did not put its insureds on notice of the possibility of an excess verdict or give them an opportunity to contribute to a settlement.

Although the jury found that Donna's injuries did not meet the verbal threshold, they awarded approximately $186,000 on her claim for lost wages. That verdict was affirmed on appeal. Mr. and Mrs. Williams then assigned to plaintiffs their claim against RCIC for alleged bad faith refusal to settle the auto accident case.

The bad faith claim was tried without a jury, on the basis of stipulated facts and documents including the deposition of RCIC's claims adjuster, and the in-court testimony of Barry Goldstein, RCIC's senior vice-president in charge of claims.

Goldstein admitted that when RCIC opened its file on the auto lawsuit, the assigned adjuster set a $75,000 reserve on the case. Setting a reserve results in that amount being accounted for as a potential liability on the company's balance sheet. According to Goldstein, the assigned adjuster Adrienne Archie would normally evaluate the settlement value of the case. Goldstein admitted that there was no documentation in RCIC's claims file to indicate that Archie ever determined the settlement value of the case, or that she ever consulted with RCIC's in-house settlement committee about a settlement proposal. However, at the 2008 bench trial, Goldstein testified that he remembered personally evaluating the case in 2003 and concluding that a verdict was not likely to exceed the policy limits.

Goldstein additionally admitted that there was no evidence in RCIC's file that the insureds were notified about the possibility of an excess verdict. He also conceded that the insureds were never notified that plaintiffs had made a demand in excess of the policy.

In a comprehensive written opinion dated April 16, 2008, Judge Paley concluded that RCIC had not made a good faith effort to evaluate the risk of an excess verdict and acted in bad faith in failing to settle the claim within the policy limits. The court noted that there was ample evidence that a verdict could exceed the limits of the policy. RCIC placed a $75,000 reserve on the case, a non-binding arbitration resulted in an award of $96,000, and RCIC's counsel advised the company that the Riehs' expert's testimony could result in a "higher verdict."

Despite this evidence, RCIC rejected numerous opportunities to settle within the $100,000 limit. The plaintiff initially proposed a settlement of $200,000 and later demanded $100,000; subsequently, the plaintiff was willing to accept $35,000, but RCIC still refused to offer more than $30,000. The judge did not believe Goldstein's testimony concerning his alleged efforts to evaluate the case. Judge Paley also considered the fact that Rutgers failed to notify its insureds of the potential for an excess verdict and failed to keep them informed as to the settlement negotiations.

Following his determination that RCIC acted in bad faith, Judge Paley held a second plenary hearing to determine the issue of counsel fees. In an opinion dated September 10, 2008, Judge Paley ...


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